Lagarde defends June rate hike as core inflation and supply shock persist

ECB President Christine Lagarde has defended the central bank's plan to raise interest rates in June, arguing that core inflation and supply-side pressures remain too persistent to pause. Speaking at a press conference, she emphasized that even a more favorable geopolitical scenario in the Middle East would not alter the need for a rate hike, as underlying price dynamics are still elevated. Her remarks pushed back against market speculation that a potential ceasefire could allow the ECB to soften its stance.

For foreign exchange traders, Lagarde's hawkish tone reinforces the interest rate differential that has supported the euro against major peers. The ECB's commitment to tightening, despite a modest 0.1 percentage point downgrade to growth forecasts, suggests the central bank is prioritizing inflation control over economic softness. This limits the scope for near-term dovish repricing and keeps the euro bid, especially against currencies where central banks are closer to cutting rates. Traders tracking real-time FX quotes on NowPrice can monitor how the euro responds to evolving rate expectations.

Looking ahead, markets will focus on upcoming eurozone inflation data and the ECB's July meeting for further guidance. Lagarde also flagged the undervaluation of the renminbi as a fresh dimension for currency markets, which could add to trade-weighted euro strength. Meanwhile, the digital euro's legislative progress through the European Parliament introduces a longer-term structural theme for the single currency, though near-term impact remains limited. The balance of risks suggests the ECB will maintain a firm stance until core inflation shows sustained decline.